Keith Gill, the well-known retail trader who became famous for being squeezed by shorts in GameStop in 2021, has recently returned to the market's attention. However, a series of posts he posted on social media platforms have sparked controversy and led to accusations of securities fraud. These posts caused GameStop's stock price to fluctuate sharply between May and June. In terms of product structure, the operating income of products valued at 10-30 billion yuan is 401/1288/60 million yuan, respectively.
A new lawsuit was filed on June 28 in the Eastern District of New York, which aims to sue Keith Gill for planning a 'stock price manipulation and dumping' plan through a series of social media posts starting from May 13. However, a former federal prosecutor believes that the lawsuit is likely to be 'doomed' to fail.
(Source: CourtListener)
The allegations claim that Gill is suspected of committing securities fraud and failed to fully disclose his purchase and sale of GameStop options, misleading his followers and causing some investors to suffer losses.
The plaintiff, Martin Radev, represented by the law firm Pomerantz, claims that he suffered damages from the so-called 'stock price manipulation and dumping' behavior after buying a total of 25 shares of GameStop stock and 3 call options in mid-May.
Gill broke a two-year silence on social media on May 13 and posted a series of mysterious emoticons on his Twitter account, now renamed X, which caused the GameStop stock price to soar by 180%. As of the close of May 14, the stock price jumped from $17.46 to $48.75. #RetailTradersComeback#
(Source: Twitter)
In a Reddit post on June 2, he disclosed his massive positions in GameStop, including 5 million shares of GME and 120,000 call options with a June 21, 2024 expiration date.
This caused GME's stock price to rise again and close above $45 that day.
As of June 13, Gill claims that he has exercised all 120,000 options and made millions of dollars in profit. It is worth noting that he used these earnings to further increase his holdings in GameStop's stocks.
The lawsuit claims that Gill did not fully disclose his intention to sell the options in advance, misleading his followers and other market participants and causing investor losses.
Former federal prosecutor and founding partner of Dynamis LLP, Eric Rosen, said in a blog post that the class action lawsuit was 'doomed to fail' from the outset and could easily be dismissed if Gill filed a motion to dismiss the 'carefully planned' case.
Rosen said that the claim that Gill should have disclosed his intention to sell the options is not sustainable in court because no 'rational person, let alone a rational investor,' would expect Gill to hold all of his options until the expiration date.
Secondly, Rosen stated that since the plaintiff's 'obvious' profits were simply a result of the influence of Gill's posts on the stock price, rather than the actual content of his posts, it is difficult to prove in court that the plaintiff was a 'reasonable investor' based on this method.
'It is unreasonable to buy securities just because a retail trader named 'Roaring Kitty' posted some harmless tweets on social media.'
Rosen stated that the most important part of investigating fraud cases is to prove that the fraudster lied or deliberately misled investors and concealed important information.
He explained that this claim is difficult to be accepted by judges, as a person named 'Roaring Kitty' posted a series of random emoticons on social media, which do not contain any information that can be proved or disproved.